This article first appeared in The Edge Financial Daily on February 7, 2018 - February 13, 2018
Daibochi Plastic and Packaging Industry Bhd
(Feb 6, RM2.32)
Maintain buy with a higher target price (TP) of RM2.59: Financial year 2017 (FY17) results met expectations. Daibochi Plastic and Packaging Industry Bhd’s FY17 earnings came in within expectations, making up 96% of our and consensus full-year estimates. The company announced an interim dividend of 1.3 sen, bringing year-to-date dividend per share to 4.8 sen. Net profit improved by 6% to RM27.1 million from RM24.5 million in FY16. This is attributed to sales that grew 5% year-on-year. The improvement in its profit is due to better profit after tax (PAT) margin (+0.4 points [ppt]), contribution from Myanmar that started in the third quarter of financial year (3QFY17) and wastage control in the Malaysia plant.
The contribution from Myanmar brought 4QFY17 PAT to RM8.5 million. At the profit before tax level, Daibochi Myanmar contributed 14%. The five-year income tax waiver granted by the Myanmar Investment Committee also started from Nov 22, 2017. Daibochi Myanmar has exported seven containers of flexible packaging to eight Malaysia-based customers in December 2017.
Growth to be seen from plants in both countries. Back in Malaysia, Daibochi is expected to deliver new orders to new customers worth RM27 million. As for Myanmar, sales may grow by another RM25 million from sales with existing customers, beverage labelling, new local sales, exports and new MNC customers that already have operations in Myanmar.
Daibochi has also planned to invest about RM10 million in printing machine and high-speed slitter for the Malaysia plant. It has earmarked about RM7 million for the Myanmar plant, which will see the addition of an extrusion machine, slitting, printing and rewinding machine.
Expect higher sales and margins for FY18 and FY19. — MIDF Research, Feb 6